In recent years, I’ve come home to CNN. I haven’t been able to stomach the vitriol on both Fox and MSNBC. CNN just seems more… well… grown up.
But their “fact check” of Obama’s outlandish assertion that under Romney’s definition “Donald Trump is a small business” stretches the limits of credulity.
The article states:
While there is no universally accepted definition of a small business, the federal government defines it as any business that employs fewer than 500 people.
The Trump Organization employs 22,000 people. But Trump also runs a number of other companies that employ fewer than 500, meaning that — under the federal government’s definition — he qualifies as a small business.
According to the U.S. Small Business Administration, which uses the 500-worker maximum in its definition, such firms employ half of all private-sector workers and pay 44% of the total U.S. private payroll. In 2009, there were 27.5 million businesses in the nation, 99.7% of which were small firms.
CNN’s assertion that fewer than 500 employees is the SBA’s definition of a small business is simply incorrect. Number of employees is only one criterion which can be used to determine whether a business is large or small. This will be obvious to anyone who spends more than 30 seconds on the SBA’s Web site.
Every business in the U.S. falls into one or more “NAICS Codes” — the North American Industrial Classification System. Size standards vary by NAICS Code, and are dependent on the specifics of each particular industry.
There are 1,047 different NAICS Codes; 499 use the number of employees as the size standard (425 of them use 500 or more employees), and 532 use an annual revenue size standard. There are a further 10 codes in the energy industry that use a 4 million megawatt/year standard. Six codes in the financial and banking area use $175 million in assets.
Among the 532 industries whose size is defined by annual revenue, the average limit is $12.3 million/year; 300 use a size standard of no more than $7 million/year. The largest revenue-based size standard is $35.5 million/year, and it only applies to 17 Codes.
So using the REAL definitions of “small business,” I challenge anyone to point to one of Trump’s many holdings that actually qualifies. The president was over-reaching on this one and CNN had to stretch the truth to back up his claim.
The president was confusing “small businesses” with S corporations: those corporations that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes, and are taxed at the individual rate rather than the corporate rate.
The IRS estimated that there were 4.5 million S corporations in the U.S. in 2007, which represented a near doubling over 10 years. By contrast, there are only about 2 million C corporations.
While S Corporations are allowed to have up to 100 shareholders, in 2006, 60 percent of S corporations had only one shareholder, 89 percent had two or less, and 84 percent had three or less.
S Corporations employ the majority of Americans, but they’re not all small businesses.
Does your head hurt yet?